German sentiment dips as the strong link of Europe looks increasingly fragile

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Peter Spence

Following alarming purchasing managers survey falls for Germany yesterday, today sentiment has dipped for the first time in five months. The Munich-based Ifo think tank said its business climate index, based on a monthly survey of some 7,000 firms, fell to 106.7 in March, down from 107.4 in February. 85 per cent of responses came before the crisis in Cyprus kicked off.

David Brown of New View Economics said the Ifo survey suggested "the bells are starting to toll in Germany that the euro zone crisis is about to hit recovery prospects again". "The biggest risk right now is that euro contagion is once again uncaged and ready to rip through the heart of economic confidence," he added.

So far the European story has been one of a strong Germany supporting its weak partners. If recovery in Germany chokes, then the wider Eurozone will surely splutter.